A below-market bid for Viacom by CBS was immediately rejected, sources familiar with the situation said Wednesday.

Viacom will now propose a counteroffer to CBS. The owner of Nickelodeon and MTV networks believes it deserves a market premium and sees cost synergies of at least $1 billion in the combination, according to sources.

The offer was delivered verbally on Friday, these sources said. The CBS offer is 0.55 shares for each Viacom class B share. Viacom believes a "market price" ratio would be more like 0.62, and the company would like an offer from CBS that values it above that.

As reported by CNBC on Tuesday, one point of contention with the deal is the executive slate that will run the combined company. Both sides appear to aggree that CBS CEO Les Moonves should run the entity and he will remain at the company for at least two years. However, Moonves wants to pick his own No. 2 and favors Joe Ianniello, CBS's chief operating officer. But Viacom and CBS controlling shareholder Shari Redstone favors Viacom CEO Bob Bakish in that role.

On Wednesday, sources said Redstone was committed to Bakish as the No. 2.

Viacom class B shares traded just above $29 a share Wednesday morning, giving the company a market value of $12.2 billion.The shares fell 4 percent on Tuesday as investors began to learn that CBS made an offer at a price below market value.

At levels CBS is currently trading, the stock offer rejected Friday would value Viacom shares at around the $28.80 level. But the ratio that Viacom believes reflects a market price because it represents where the stocks were before any deal discussions took place puts the stock at $34.59 level. And the company wants more than that.